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Rising Health Costs, Medical Debt and Chronic Conditions

Issue Brief No. 88September 2004
Ha T. Tu

About 57 million working-age Americans18-64 years oldlive with
chronic conditions, such as diabetes, asthma or depression. In 2003, more than
one in five, or 12.3 million people with chronic conditions, lived in families
with problems paying medical bills, according to a new study by the Center for
Studying Health System Change (HSC). Rising health costs have hit low-income,
privately insured people with chronic conditions particularly hard. Between
2001 and 2003, the proportion of low-income, chronically ill people with private
insurance who spent more than 5 percent of their income on out-of-pocket health
care costs grew from 28 percent to 42 percent. For the 6.6 million uninsured,
chronically ill Americans, the financial consequences are especially gravenearly
half reported medical bill problems, making them much more likely to forgo or
delay needed medical care. Among the 3 million uninsured, chronically ill people
with medical bill problems, four in 10 went without needed care, two in three
put off care and seven in 10 did not fill a prescription in the past year because
of cost concerns.

The Financial Burden of Chronic Conditions

he high and rising cost of health care
causes financial problems for many
Americans,1 but people living with chronic
conditionssuch as diabetes, asthma or
depressionare especially vulnerable to
problems paying medical bills. Because
many chronic conditions require ongoing
medical care, people living with chronic
conditions often face higher out-of-pocket
spending on medical care.2 Estimating
conservatively, 57.3 million working-age
Americans33 percent of the working-age
population—have at least one chronic condition,
according to HSCs 2003 Community
Tracking Study (CTS) Household Survey
(see Data Source).

Among working-age people with chronic
conditions, more than one in five, or 12.3
million people, lived in families reporting
problems paying medical bills in the past
year. Such problems are especially acute
for the 6.6 million uninsured people living
with chronic conditions (see Figure 1), with
almost half of them reporting medical bill
problems. Among these 3 million uninsured,
chronically ill people whose families
had medical bill problems, 42 percent went
without needed care, 65 percent delayed
care and 71 percent failed to get needed
prescription drugsall because of cost
concerns.

While uninsured working-age people
with chronic conditions are more likely to
have problems paying for and accessing
care, many insured people also face problems.
Indeed, a majority of the chronically
ill working-age adults who report high
health care costs and access problems are
covered by private insurance. Even for
insured people, low incomesdefined as
family income below 200 percent of the
federal poverty level, or $36,800 for a family
of four in 2003increase the likelihood
of medical bill problems.
Between 2001 and 2003, the proportion
of low-income, chronically ill people with
private insurance who spent more than 5 percent
of their income on out-of-pocket health
care costs grew from 28 percent to 42 percent,
a 50 percent increase to 2.2 million people.

People with Chronic Conditions Face Higher Out-of-Pocket Costs

eople with chronic conditions are more
likely to spend a greater share of their
income on out-of-pocket medical costs (see
Table 1). Across the entire working-age
population in 2003, 12 percent reported
family out-of-pocket health costs exceeding
5 percent of family income.3 Among only
working-age adults with chronic conditions,
the proportion with out-of-pocket
costs greater than 5 percent of income was
19 percent.

In 2003, 38 percent of low-income,
chronically ill people had out-of-pocket
health costs greater than 5 percent of family
income, compared with 8 percent of chronically
ill people with family incomes higher
than 400 percent of poverty.

Insurance coverage also makes a
big difference to the out-of-pocket cost
burden: 35 percent of all uninsured,
chronically ill people reported health
costs exceeding 5 percent of income,
compared with 13 percent of privately
insured, chronically ill people. However,
that 13 percent translates into 5.1 million
privately insured people with chronic
conditions whose health costs exceeded 5
percent of incomemore than twice the
2.2 million uninsured people whose health
spending exceeded 5 percent of income.
Out-of-pocket costs exclude health insurance
premiums paid by insured people,
so 5 percent of income is a conservative
estimate of what insured people spend on
health care overall.

Between 2001 and 2003, the proportion
of people with high out-of-pocket
costs relative to income increased overall.
The increase occurred almost completely
within the privately insured group, and
the increase was most pronounced for
low-income people. The proportion of lowincome,
privately insured, chronically ill
people with out-of-pocket costs exceeding 5
percent of family income increased from 28
percent in 2001 to 42 percent in 2003an
increase of 50 percent. This change likely
reflects the impact of increased patient
cost sharing for insured people, as well as
the fact that health care costs increased at
a much faster pace than incomes. By 2003,
low-income, chronically ill people covered
by private insurance had become as likely by private insurance had become as likely
as their low-income, uninsured counterparts
to spend at least 5 percent of income
on health care.

Low Incomes, Lack of Insurance Key to Medical Bill Problems

orking-age adults with chronic conditions
were more than twice as likely as
healthy working-age adults to live in families
that had problems paying medical bills
in the past year21 percent vs. 10 percent
(see Figure 2). In comparison, 35 percent of
low-income people with chronic conditions
lived in families with medical bill problems.

Uninsured people with chronic conditions
are especially vulnerable to medical
bill problems: almost half (45%, or 3
million people) are in families with such
problems. However, even people covered by
private insurance are not immune to these
financial concerns: one in six privately
insured people with chronic conditions
(16%, or 6.4 million people) live in families
with medical bill problems. Among those
who are privately insured but low income,
35 percentalmost 2 million peoplehave
family medical bill problems. While this
rate is lower than the 48 percent for uninsured,
low-income adults with chronic conditions, it underscores the limitations of
health insurance alone in protecting people
from the high costs of treating chronic
conditions.

Figure 2Problems Paying Medical Bills, Working-Age Adults

Large Medical Bills Linked to Family Finances, Access Problems

mong working-age adults with chronic
conditions whose families had problems
paying medical bills in the past year,
negative effects on other aspects of family
finances are common: 68 percent of
their families had problems paying for
other necessities, such as food and shelter;
64 percent were contacted by a collection
agency; 55 percent put off major purchases;
and 50 percent had to borrow money. More
than nine in 10 families with medical bill
problems faced at least one of these negative
effects on family finances, and almost a
quarter experienced all four.

Medical bill problems also have serious
consequences for access to medical
care. People with chronic conditions whose
families have medical bill problems are four
to five times as likely to forgo or delay care
because of cost concerns as those whose
families reported no medical bill problems
(see Table 2). Among chronically ill people
whose families had trouble paying medical
bills, 19 percent (2.4 million people) went
without needed care, 38 percent (4.7 million
people) delayed care, and 53 percent (6.6
million people) failed to get needed prescription
drugs because of cost concerns.

As high as these rates of access problems
are overall, problems are especially
acute for the uninsured. Among uninsured
people with chronic conditions and family
problems with medical bills, 42 percent
went without care, 65 percent delayed care
and 71 percent did not fill a prescription
because of cost concerns.

Rates of access problems for the privately
insured with medical bill problems, while
lower than for the uninsured, are still considerable:
10 percent went without care, 30
percent delayed care and 43 percent did not
fill a prescription because of cost concerns.
These results suggest that once families
have trouble paying medical bills, concerns
about accumulating more bills and further
straining family finances may cause many
people with chronic conditions to curtail
their use of needed medical services.

Table 2
Access Problems for People with Chronic Conditions, by Insurance Status and
Family Medical Bill Problems

All

Privately Insured

Uninsured

Unmet Need Due to Cost

All Adults 18-64 with Chronic Conditions

7%

4%

24%

In Families Without Problems Paying Medical Bills

4

3

9

In Families with Problems Paying Medical Bills

19

10

42

Delayed Care Due to Cost

All Adults 18-64 with Chronic Conditions

16

12

46

In Families without Problems Paying Medical Bills

10

8

32

In Families with Problems Paying Medical Bills

38

30

65

Unmet Need for Drugs Due to Cost

All Adults 18-64 with Chronic Conditions

22

15

49

In Families without Problems Paying Medical Bills

13

9

32

In Families with Problems Paying Medical Bills

53

43

71

Note: Differences between privately insured and uninsured
and those with and without medical bill problems are statistically significant
in all cases at p Source: HSC Community Tracking Study Household Survey, 2003

Implications

he finding that people with chronic
conditions bear higher out-of-pocket cost
burdens than other adults is hardly surprising.
However, the extent of the cost
burden and the degree to which it impedes
timely access to medical care are cause for
concern. Failure to receive preventive and
ongoing care for chronic conditions can
result in serious health consequences for
patients.

The uninsured chronically illwho
are mostly low incomebear the heaviest
out-of-pocket cost burden and frequently
put off or go without needed care. Clearly,
affordable insurance coverage would give
this vulnerable group a measure of financial
protection and help to narrow very large
access gaps.

Uninsured people who have chronic
conditions and need medical care must
shoulder high and rising costs on their
own or rely on a network of charity
care. Increased funding for community
health centers in recent years has helped
to improve primary care access for lowincome
and uninsured people, but access
varies widely across communities.4 And
even in communities with strong safety
nets, access to specialty services and prescription
drugsboth essential to many
people with chronic conditionscontinue
to present major problems.

The financial burden borne by
Americans living with chronic conditions
may well increase in the future.
Along with the growth in the number of
uninsured people over time and the fact
that health care costs are rising more
rapidly than incomes, many employers
continue to increase patient cost sharing
through higher deductibles, copayments
and coinsurance, where patients pay a
percentage of the bill instead of a fixeddollar
copayment.

Recent studies have found that doubling
a drug copayment from $10 to $20 triggered
substantial cutbacks in the use of
important prescription drugs, such those
used to treat diabetes and high cholesterol.5
Conversely, an employer experiment that
reduced employee copayments for diabetes
and asthma drugs resulted in fewer emergency
room visits and hospital stays for
those conditions. Such results may encourage
employers and insurers to explore what
one insurer calls evidence-based co-pays,
where copayments would be reduced or
waived for clinically valuable and costeffective
treatments.6

Another cost-sharing refinementone
that would give financial relief to low-income
workersis varying cost-sharing
levels according to income. Some employers
already tie premium contribution levels
to income; the approach could be extended
to patient cost sharing by varying either
deductibles or out-of-pocket maximums.7

Many chronically ill people faced with
high out-of-pocket costs may find little
appeal in insurance options that emphasize
broad provider choice for patients but
demand greater financial risk, such as high
deductibles. Indeed, for many in this population,
options that restrict choice of providers
in exchange for lower out-of-pocket
expenses may prove a better fit. CTS data
show a majority of Americans with chronic
conditions being willing to give up provider
choice in order to save on out-of-pocket
costs, and the lower a persons income, the
stronger the willingness to make this tradeoff
(see Supplementary Table 2). Traditional
closed-network health plans, which fell out
of favor in recent years, may merit a second
look for the relatively low out-of-pocket
costs they offer. Tiered-provider networks,
which have yet to be widely adopted, may
provide another cost-saving option for
patients willing to limit their choice of doctors
and hospitals.

The benchmark of 5 percent was used
for out-of-pocket-spending-to-income
because at this level of health care
spending, about 50 percent of people
reported family medical bill problems.
An alternative analysis of out-of-pocket
costs relative to income was conducted
using 10 percent as the benchmark.
The patterns shown in that analysis
are consistent with the 5 percent
results. See Supplementary Table 1 to
see percentages of people with out-ofpocket
costs greater than 10 percent of
income.

Data Source

The findings reported in this Issue Brief are based on an analysis of the
2003 CTS Household Survey, a nationally representative survey involving information
on about 24,500 families and 46,600 people. The survey asked adult respondents,
including 31,935 working-age adults, whether they had been diagnosed with one
of more than 10 chronic conditions and whether they had seen a doctor in the
past two years for the condition.The list of chronic for the condition.The list
of chronic conditions includes asthma, arthritis, diabetes, chronic obstructive
pulmonary disease, heart disease, hypertension, cancer,benign prostate enlargement,
abnormal uterine bleeding and depression. Because the CTS list of conditions
is not exhaustive, the estimate of the prevalence of chronic conditions is likely
conservative. In comparison, 41 percent of working-age adults reported at least
one chronic condition in the 1996 Medical Expenditure Panel Survey.